The Upside of a Downturn: Challenges in the Current Calgary Housing Market

It’s a New Year, but we’re dealing with the same struggle. You may not be convinced about selling your home with the challenges facing the Calgary housing market, but there is an upside. Below is a current analysis of the Calgary housing market.



Challenges

As of January 8, 2019, MLS sales in Calgary were down 24 %, while pending sales were off by 50 %. New listings were down four 4%, meaning people either unlisted their homes or were not confident enough to list at all.

Challenges in the real estate market will continue in 2019 and with the growing Canadian economy, an increase in interest rates will also impact buying a home in Calgary. Rate increases in the second half of 2019 with no job improvement means that the sale of houses is expected to be low. Weak demand and excess supply will cause a further price drop in 2019.

The overall marketplace will likely see a decrease by -2.34 percent across the city, -2.27 percent for a condo, -2.49 percent for an attached home and -2.33 percent for a detached home.

Top Considerations For 2019 Include The Following:

  • Conditions in the Energy Sector - If conditions in the energy sector worsen, this could lead to a downside risk of employment and wages and create an oversupply and steeper price declines in the Calgary housing market.
  • Canadian Economy - If the Canadian economy underperforms there will likely be further rate increases in 2019 impacting housing demand.
  • Inventory - If construction and new-home inventories do not ease, it will prolong a buyer’s market condition.
  • Elections - The impact of elections on government spending and policies.
  • Resale Prices - A decline in resale prices could make the resale market better for purchasers rather than new home buyers.

Variables Depending On The Type Of Home You Choose

There are many variables to consider, depending on what type of home you choose. The outlook on each type of home available for 2019 is as follows:

 

 

 

 

 

  • New Homes - In 2018, the number of new homes available on the market was a factor in the overall excess supply last year. New home starts are expected to slow down in 2019 due to rising lending rates, and because of the current pace of construction, will take time for the new-home supply to normalize. New home inventories rose to new highs in 2018, but in 2019, levels are expected to decrease due to a pullback of multifamily starts, while many new-home builders have become assertive with pricing to sway consumers from resale homes to new homes.
  • Rental - The rental market has seen an improvement due to stricter conditions and improving net migration, while the ease in vacancy rates has helped reduce oversupply. If this continues, we could see more room for rental-rate growth and improvement in ownership demand. This ownership transition will be slow as rental vacancies are still at higher rates than normal. These rates did trend down in 2018, dropping from 6.7 percent for a two bedroom to 4.2.
  • Resale - With job losses close to the end of the year, market confidence dropped due to concerns over oil prices. This resulted in a steep decline in sales activity and an oversupplied market. Many of these concerns will continue this year because of weakness in the labour market; but supply is adjusting, and if this continues, the market should ease with the rate of price declines slowing. The resale market will remain oversupplied, and supply levels will be slow because of weak economic activity.
  • Detached - The most significant market shifts happened in the detached homes sector due to a lack of demand. Weak job creation combined with higher lending rates impacted the higher-priced market. Since oversupply will be common throughout 2019, prices are expected to fall during the first portion of the year. Because of this, the overall oversupply is expected to persist for 2019, with no stabilization until the end of 2019. Annual price declines of 2.33 percent will result in a benchmark price of $485,216.
  • Apartments -  With higher lending rates and affordability issues, condominium and apartment sales should expect some stabilization. Current supply levels in the new home rental and resale markets will still be a problem in 2019, preventing an opportunity for price recovery. Sales are expected to be similar to last year. Oversupply will cause further price declines.
  • Attached - More affordable options in the housing market will leave attached home sales activity weak, while high inventory will power a further price decline across the sector next year. Supply levels are expected to adjust but will take time to return to normal levels. Attached sales are expected to fall 2.5 percent below 2018 levels, while oversupply will cause an unexpected decline of 2.49 percent in 2019. Any improvements in affordable price ranges will be offset by challenges in the higher priced product.

Find Your Dream Home Without Hassle

Finding a home can be a complex and frustrating experience, but our team of professional realtors are on hand to make the process as easy and simple as possible. To find out more about our services, contact us at (403) 284-6333, fill in our contact form or visit in person at 206-2411 4 St NW, Calgary, AB T2M 2Z8.

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